OptionsHouse

Options Trading News

June 11, 2013  Tue 10:03 AM CT

RAX: SEE CHART GET CHAIN FIND STRATEGIES
Rackspace has lost more than half its market value this year, but one trader apparently believes that the stock is due for a bounce.

More than 2,000 July 35 calls traded in a strong buying pattern this morning, led by a print of 1,430 that went for $2.20. This is clearly new activity, as the volume was well above the strike's open interest of just 261 contracts before the session began.

RAX is up 1.15 percent to $35.96 in morning trading, advancing along with other cloud-computing names despite the broader market downturn. The stock hit an all-time high of $81.36 in January but gapped down after two quarterly reports since then.

Today's long calls, which lock in the purchase price for the stock, will track the share price closely because they are in the money. They are looking for RAX to gain roughly 3.5 percent by mid-July but will rapidly lose value if the stock doesn't rise. (See our Education section)

Calls outnumber puts by 6 to 1 so far today.
Share this article with your friends


Related Stories

RAX

Is Rackspace ready for rebound?

June 19, 2015

The cloud-computing company is down more than 30 percent from its 52-week high two months ago, with most of that drop coming on May 12 when revenues missed estimates.

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »